Verizon Bets On More Streaming Sports Fans With NFL Deal

With the wireless market getting saturated, carriers are looking for ways to differentiate and better monetize their existing subscriber base as the demand for mobile data grows.

Verizon recently extended its exclusive contract with the National Football League to offer subscribers the ability to live-stream all the NFL games on their Verizon phones via the carrier’s NFL Mobile app. The current deal gives Verizon permission to offer live streaming services for only the Sunday, Monday and Thursday night games. Starting 2014, the contract extension will kick off, giving Verizon subscribers access to all home-market Sunday afternoon NFL games as well. The deal, which will cost Verizon about $250 million annually, is about 40% costlier than the current four-year deal that will expire in 2014.

Verizon is betting that having exclusive access to popular content will not only help it differentiate from rivals in a saturated market but also make its subscribers to spend more on mobile data and upgrade to higher tiers of its shared data plans. The advent of 4G LTE has made access to high-speed mobile Internet possible, and easy viewing and streaming of large-sized video files on the go is opening up new avenues for carriers to pursue growth. In order to be able to better tap this growing trend, Verizon and AT&T have dropped their unlimited data plans and are now actively promoting tiered data plans. With mobile data demand surging, we expect the smaller carriers to follow suit soon.

As smartphone penetration rises and it gets tougher for carriers to increase ARPU levels simply by driving smartphone sales, the wireless industry is likely to put greater emphasis on services and content that help increase data demand. Several recent reports have surfaced indicating that the content providers are beginning to take an active interest in growing their presence beyond television. Some of the bigger media companies may indeed be looking to ink agreements with carriers that will allow subscribers to access their content without having to worry about data caps. According to the Wall Street Journal, ESPN has had talks with at least one major U.S. carrier in this regard. With data caps being a potentially huge deterrent to wireless data consumption, getting content providers to subsidize wireless connectivity for subscribers could be a big win for the carriers.

Just as carriers looked to stave off commoditization of their services by offering smartphones at subsidized prices, content could bring the next wave of differentiation. AT&T’s exclusive deal with Apple had helped it compete more effectively with the industry behemoth, Verizon, and a similar content deal with one of the media companies could be in the offing. For its part, Verizon has already launched its video streaming service in a joint venture with Redbox, in a bid to build content relationships that could prove very valuable down the road. The deal with NFL goes to show that the carrier is looking to make content one of its biggest focus areas in the coming years as high-speed LTE adoption fuels the demand for mobile video viewing.

Looking at the specific dynamics of the NFL deal, it doesn’t look like a particularly costly one for Verizon. The basic version of the NFL Mobile app is available for free to all Verizon subscribers but it doesn’t allow live-streaming. The premium app which does is available for subscription at only $5 per month. In order to break even at $250 million, Verizon needs to get at least 4.25 million of its subscribers to pay for the premium service every year. Considering that Verizon had over 93 million postpaid subscribers as of Q1 2013, that figure shouldn’t be tough to achieve, if marketed properly.

Verizon doesn’t report its NFL Mobile app download numbers but the Google Play store has received around 10 million installations. The Apple App store should have seen a sizable number of downloads as well. Not all the downloads would have resulted in paid subscriptions but considering that Verizon would benefit from the higher data usage of the users of its basic free app as well, the deal seems like a big win for the carrier.

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